U.S. stocks slammed on worst day since June

Nasdaq Composite ends at lowest level since early August

By

KateGibson

NEW YORK (MarketWatch) — U.S. stocks fell sharply Friday, with the major indexes suffering their worst single-day drop since June, after disappointing earnings from heavy hitters, particularly in the tech sector.

“We’ve had some household names disappointing on revenue, earnings or guidance. We had about 80 companies reporting this week: financials that did better and technology that did worse,” said Art Hogan, market strategist at Lazard Capital Markets LLC in New York.

“Since this is the worst day we’ve had in months, it reminds us that we haven’t had much volatility or downward pressure since the bottom in June,” Hogan added.

Remembering Black Monday crash of 1987

(22:25)

Francesco Guerrera and former SEC chairman David Ruder discuss his memories of the stock-market crash of 1987, and Chuck Jaffe says that while the stories of the crash are fresh, the actual losses have been forgotten.

Next week about 140 S&P 500
SPX, -0.23%
companies are scheduled to report, with the coming earnings to include companies from a broader range of sectors, including consumer, energy and industrials. If those sectors follow in technology’s wake, there would be more reason for concern, Hogan said.

Retaining a weekly rise of 0.3%, the S&P 500 index dropped 24.15 points, or 1.7%, to 1,433.19, with consumer discretionary taking the biggest hit of its 10 major industry groups.

The Dow Jones Industrial Average
DJIA, -0.32%
slumped 205.43 points, or 1.5%, to 13,343.51, shaving its gain for the week to 0.1%.

McDonald’s Corp.
MCD, +0.70%
paced blue-chip losses that included all but one of its 30 components. The fast-food chain’s shares sank 4.5% after it missed consensus estimates for the third quarter.

“The earnings season is not great right now, but the fundamentals haven’t changed; the U.S. economy is still improving, and it hasn’t gotten worse in Asia or Europe,” said David Kelly, chief market strategist at J.P. Morgan Funds. After a strong run, “the market is taking a pause,” Kelly said.

Wall Street’s focus is where it should be, on corporate earnings, which are “starting to slow down as expected in a typical third quarter,” said Chip Cobb, senior vice president at BMT Asset Management in Bryn Mawr, Penn. “It’s mildly disappointing because you want every quarter to be better than the last,” Cobb added.

Off the Dow, Honeywell International Inc.’s
HON, -0.31%
shares rose 1.7% after the diversified manufacturer cut its 2012 sales forecast but reported quarterly income that beat forecasts.

REVISITING THE 1987 stock market CRASH

10 lessons from the market crash of 1987The more things change, the more they stay they same, except they happen a lot faster now. Here’s some wisdom from investors who were in the trenches 25 years ago when the stock market saw its biggest one-day percent drop.

For every stock rising, more than three fell on the New York Stock Exchange, where almost 946 million shares traded. Composite volume neared 3.9 billion.

Oil and gold prices also fell, with crude futures
US:CLX2
off $2.05 at $90.05 a barrel and gold futures
US:GCZ2
losing $20.70 to $1,724 an ounce.

The dollar
DXY, +0.06%
gained against other global currencies, including the euro
EURUSD, +0.0000%
while Treasury yields fell, with the benchmark 10-year note
US:10_YEAR
used in figuring the rate of home mortgages and other consumer loans down to 1.770%.

Housing data

A trade group reported Friday that sales of existing homes declined 1.7% in September from a 7.8% rise the prior month. The data from the National Association of Realtors was in line with expectations, but as with Thursday, economic reports and events in Europe both took a back seat to corporate results. Read: Sales of existing homes drop in September.

“Home sales did fall, but the supply of homes also fell, and if you look at the inventory of new and existing homes combined, there are 2.4 million total homes for sale in the U.S., the lowest since July 2002,” said Kelly.

Homes for sale “peaked at 4.4 million in July of 2007, so we’re 2 million lower than just after the peak of the housing bubble,” said Kelly, who noted the lower supply should drive prices up, increase housing starts as well as household net worth, and lead to more confidence and bank lending.

“The fact they for the most part have continued to give us moderately positive guidance has allowed us to focus attention on back here. Unless we have Spain or France saying ‘hey, we’re not going to play,’ then it’s a concern,” said Cobb, of the ongoing efforts to keep the borrowing costs of both nations under control in order to keep them in the euro zone.

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